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Medium-sized company accounts


1. What is a medium-sized company?

As with a small company, a medium-sized company is determined by its turnover, balance sheet total (meaning the total of the assets) and average number of employees.

A medium-sized company can prepare accounts according to special provisions applicable to medium-sized companies. It can also choose to submit reduced information to Companies House.

Public companies and certain financial services companies cannot qualify as medium-sized companies.

Similarly, companies which are part of a group which has members who are public companies or financial services companies cannot qualify as medium-sized for accounting purposes.

If you think the company might qualify as medium-sized, you should consider consulting a professional accountant before you prepare accounts.

2. What are the conditions to qualify as a medium-sized company?

To be a medium-sized company, you must meet at least two of the following conditions:

annual turnover must be no more than £25.9 million;
the balance sheet total must be no more than £12.9 million;
the average number of employees must be no more than 250


3. Are any companies excluded from being treated as medium-sized?

Yes. A company cannot be treated as a medium-sized company if it is, or was at any time during the financial year, one of the following:

a public company;
a company that has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity or that carries on an insurance market activity; or
a member of an ineligible group.
A group is ineligible if any of its members is:

a public company;
a body corporate (other than a company) whose shares are admitted to trading on a regulated market;
a person (other than a small company) who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity;
a small company that is an authorised insurance company, a banking company, an e-money issuer, a MiFID (ie Markets in Financial Instruments Directive) investment firm or a UCITS (i.e.Undertakings for Collective Investment in Transferable Securities) management company; or
a person who carries on insurance market activity.


4. Can a company qualify as a medium-sized company every year?

Generally, a company qualifies as ‘medium-sized’ in its first accounting period if it fulfils the conditions in that period. In any subsequent period a company must fulfil the conditions in that period and the period before.

However if a company which qualified as medium-sized in one period no longer meets the criteria in the next period, it may continue to claim the exemptions available for the following period. If the company then reverts back to being medium-sized by meeting the criteria the exemption will continue uninterrupted.

If you think the company might qualify as medium-sized, you should consider consulting a professional accountant before you prepare accounts.

5. What will medium-sized company accounts include?

Medium-sized accounts must include:

a profit and loss account;
a balance sheet, signed by a director;
notes to the accounts; and
group accounts (if appropriate).
And should be accompanied by:

a directors' report including a business review;
an auditor’s report (unless the company is exempt from audit under section 482 of the Companies Act 2006 (non-profit-making companies subject to public sector audit));


6. What are the exemptions available for medium-sized companies?

Medium-sized companies may omit certain information from the business review in their directors' report (that is, analysis using key performance indicators so far as they relate to non-financial information). Also a medium-sized company which is part of an ineligible group can still take advantage of the exemption from disclosing non-financial key performance indicators in the business review.

Medium-sized companies preparing Companies Act accounts may omit disclosure with respect to compliance with accounting standards and related party transactions from the accounts they send to their members.

Medium-sized companies preparing Companies Act accounts may choose to file a slightly reduced version of the profit and loss account (see regulation 4 of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008).

7. What does a medium-sized company have to deliver to Companies House?

Abbreviated accounts of a medium-sized company must include:

the abbreviated profit and loss account (this must be full if preparing IAS accounts);
the full balance sheet;
a special auditor's report;
the directors' report; and
notes to the accounts.
The special auditor's report should state that in the auditor's opinion the company is entitled to deliver abbreviated accounts in accordance with section 445(3) of the Companies Act 2006 and that they have been properly prepared in accordance with the regulations made by the Secretary of State.

The balance sheet (and if appropriate, the directors' report) must contain a statement that the accounts have been prepared in accordance with the special provisions of section 445(3) Companies Act 2006 in regard to medium-sized companies.

8. Are there special rules for medium-sized groups?

No. A medium-sized parent company must prepare group accounts and submit them to Companies House

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Chapter 8 - Dormant company accounts
1. What is a dormant company?

A company is dormant if it has had no 'significant accounting transactions' during the accounting period. A significant accounting transaction is one which the company should enter in its accounting records.

When determining whether a company is dormant you can disregard the following transactions:

payment for shares taken by subscribers to the memorandum of association;
fees paid to the Registrar of Companies for a change of company name, the re-registration of a company and filing annual returns; and
payment of a civil penalty for late filing of accounts.
2. What are the conditions that a dormant company must meet to be exempt from audit?

A dormant company is exempt from having an audit for that financial year if:

it has been dormant since its formation; or
it has been dormant since the end of the previous financial year and it meets the following conditions:
it is entitled to prepare individual accounts in accordance with the small companies regime;
it is not required to prepare group accounts; and
it qualifies as a 'small company' in relation to that year (see Chapter 6), or would have qualified as small but for the fact that it is a public company or is a member of an ineligible group.
3. What exemption is available?

Dormant companies can claim exemption from audit and need only prepare and deliver to Companies House an abbreviated balance sheet and notes. You do not have to include a profit and loss account and directors' report in dormant company accounts filed at Companies House, but you must provide a directors' report to members.

A company may not take advantage of the dormant company audit exemption if at any time in the financial year in question it:

is a public company unless the company is dormant;
is an authorised insurance company, a banking company, an e-money issuer, a MiFID (ie Markets in Financial Instruments Directive) investment firm or a UCITS (i.e.Undertakings for Collective Investment in Transferable Securities) management company; or
carries on insurance market activity;
Nor can a company take advantage of the dormant company audit exemption if an audit is required by a member or members holding at least 10% of the nominal value of issued share capital or holding 10% of any class of shares; or - in the case of a company limited by guarantee - 10% of its members in number. The demand for the accounts to be audited should be in the form of a notice to the company, deposited at the registered office at least one month before the end of the financial year in question. The notice may not be given before the financial year to which it relates.

A company is not entitled to the dormant company audit exemption unless its balance sheet contains the statements referred to in question 5 below.

4. What information must dormant company accounts contain?

Dormant company accounts submitted to Companies House need not include a profit and loss account or directors' report.

Unaudited dormant accounts are much simpler than those of a trading company but must contain:

a balance sheet containing statements above the director's signature to the effect that the company was dormant throughout the accounting period – see question 5.
any previous year's figures for comparison - even though there are no items of income or expenditure for the current year; and
certain notes to the balance sheet - a full list of items to be covered appears at the end of this chapter.
The right to prepare a dormant balance sheet for filing at Companies House does not affect the company’s obligations to prepare full accounts for its members – see chapter 4.

5. What statements do I need to make on the balance sheet?

If you submit your accounts to Companies House on paper, you must check that you have the following statements above the director's signature:

For the year ending ………………………. (dd/mm/yyyy) the company was entitled to exemption from audit under section 480 of the Companies Act 2006 relating to dormant companies.

Directors’ responsibilities:

The members have not required the company to obtain an audit of its accounts for the year in question in accordance with section 476; and
The directors acknowledge their responsibilities for complying with the requirements of the Act with respect to accounting records and the preparation of accounts.
A private company that qualifies as small should also include the following statement on the balance sheet:

These accounts have been prepared in accordance with the provisions applicable to companies subject to the small companies’ regime.

Accounts submitted online have inbuilt checks which will prevent common errors and omissions of the necessary statements.

6. Can I obtain a standard form for dormant accounts from Companies House?

Yes. WebFiling offers free downloadable dormant company accounts document templates. These contain inbuilt checks so that you can be sure you haven’t omitted any key information.

Alternatively, you can download a paper form AA02, which is for dormant companies that have not traded since incorporation where the company is not a subsidiary. This form is unsuitable for companies that became dormant after trading. In this case, you will need to prepare dormant accounts as described in question 4 and 5 of this chapter.

7. How long do I have to submit dormant accounts to Companies House?

You have the same time allowed for filing as for other accounts, and the same penalties for late filing apply.

8. What happens if my company starts trading again?

The company will cease to be exempt from audit as a dormant company if it:

begins commercial or trading activities during the financial period; or
would no longer qualify for some other reason, eg because there have been significant accounting transactions that need to be entered in its accounting records.
If either of these happened, you might have to submit full accounts for the financial year in which the company ceased to be exempt, and the directors might need to appoint auditors for the company. However, it may be that the company would qualify for exemptions as a small company. More information about company audit requirements and audit exemption for small companies is covered in chapter 6 of this guide.